Regulators should recognize physical constraints on industry

The U.S. Senate Subcommittee on Energy and Natural Resources is scheduled to hold a hearing today to examine the impacts of COVID-19 on the energy industry. The liquid terminal industry, and particularly terminal storage, has seen enormous impacts from the pandemic and has gone above and beyond to successfully meet the challenge. ILTA submitted written testimony to the record. Read the full testimony here. Highlights from the testimony can be found below. 

 “Terminal storage plays an essential role by greatly enhancing the flexibility of the supply chains for both petroleum and refined products and allowing all players along these supply chains to respond to market fluctuations.”

 “Beginning this past spring, several developments caused a “perfect storm” that dramatically increased the demand for petroleum storage. First, gasoline demand fell precipitously due to lessened economic activity caused by COVID-19 stay-at-home orders. Second, foreign petroleum producers such as Russia and Saudi Arabia flooded markets with supply. Had it not been for these extraordinary events, which occurred nearly simultaneously, the enormous storage capacity provided by our industry would almost certainly have been extensive enough to balance supply and demand and provide valuable flexibility to oil markets.”

 “…[T]hese extraordinary circumstances have also placed unforeseen regulatory burdens on our industry.” 

 “The current, unprecedented demand for storage has meant that terminal operators have been unable to take tanks out of service. As a result, they have not been able to conduct the required out-of-service inspections. The Environmental Protection Agency seems to acknowledge the difficulty faced by terminal operators, particularly during the COVID-19 pandemic, but its guidance to date has been sparse and has not provided adequate certainty for terminal operators.”

“[W]hen oil and refined product markets come closer into balance…there will almost certainly be a substantial backlog of tanks requiring these decadal inspections. Depending on how EPA approaches this problem, it could cause additional hardships for the industry.”

 “Our goal in raising this issue today is to draw attention to the need for transparent guidance from EPA to ensure that our members are not penalized for circumstances beyond their control – either during the COVID-19 pandemic or afterward when they will face a backlog in out-of-service inspection requirements. We need a plan that is fair and achievable, on a timeline that is agreed between members of our industry and their regulatory partners.”